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Viewpoint: Valuation, levies and growth factor into property tax system

Some homeowners pay very close attention to the complexities of the Minnesota property tax system; many others just have one question: Will my taxes go up next year, or will they go down?

Unfortunately, the complexities of the system mean that question is not an easy one to answer, and it takes more than one piece of information to answer it. The Minnesota property tax system is one with many moving parts.

One moving part is a property’s valuation. Washington County taxpayers just received their valuation notices in late March. The notice includes the assessor’s estimate of the market value of your home or business as of Jan. 1, 2014, which will be used to determine property taxes billed and payable in 2015.

The housing market is recovering in Minnesota after the long slog of the Great Recession. After a number of years in which most properties were experiencing dropping values, the 2014 valuations are showing most properties are experiencing rising values. For the most part, that is good news, as fewer people will be underwater on their mortgages or may be able to refinance their mortgage if needed. Our homes are often the most valuable asset we own.

The other side of the coin is that people are concerned that their rising valuations could make their taxes rise. It is important to remember that higher valuations do not translate directly into higher taxes — valuations are only one factor in final tax bills. It is possible to have rising valuations, and falling taxes, and vice versa. The budget and property tax levy decisions made by your city or township, the county, and the school district impact the tax amounts, as do state legislative changes to the property tax system.

For example, if the levy is held flat and every property value goes up 20 percent, every property would pay the same in taxes as they did the previous year. If the levy is flat and there is new construction to spread out some of the tax burden, people would actually see decreases. If the levy is increased, depending on if it increased more than the jurisdiction’s growth, taxpayers could see an increase or decrease. In summary, the local levy decisions and tax base growth are big players in whether or not your taxes will go up. At this point in the tax cycle we are unable to determine the impact of the value increase for Pay 2015 as local jurisdictions have not determined the 2015 levy amount.

As with any complex system, it can only work with accurate information. If you believe the assessor’s office doesn’t have the most up-to-date data or correct information on your property, you certainly should call your assessor or contact me. The value as set by the assessor should reflect the market and is based on sales that have occurred for similar properties in your community and similar communities. While we all have a tendency to look at the percentage change, either up or down, on the value of our property from one year to the next, the key question to consider is whether you think you could sell your property for the current assessed value. If the answer to that question is no, then I would encourage you to talk with the assessor, share information, and see if an adjustment is warranted either this year or in future years.

Thank you for the opportunity to serve our great community. As always, please contact me anytime with any comments, concerns or questions.